Commentary: Qimonda has to cope with uncertainty

MUNICH, Germany  Despite the fact that the memory business was considered Infineon's problem child, Qimonda, the memory subsidiary of the German chip giant set to begin operations on May 1, has a chance to make its way in the memory market. But there are still many uncertainties to overcome, not least surrounding its still uncertain initial public offering of shares.

Despite some brave words at Qimonda’s launch from Wolfgang Ziebart, Infineon’s chief executive, it is not easy to see how a company that claims to be world's number two in terms of DRAM manufacturing capacity but is number four in terms of sales revenue could be a winner in such a shark tank as the DRAM market. After several poor years the DRAM market is improving for manufacturers, but it is still notorious for its throat-cutting price competition and its extremely volatile demand and production cycles.

And despite the recent upswing it is not clear that the market has changed its nature or that “fast, creative, passionate” Qimonda will have a different culture or level of success from an Infineon that “never stops thinking”.

However, Infineon's team does at least have a plan as to how it will conquer market share.

"The times are past when DRAM chips were mainly built for the PC market," Ziebart said at the launch press conference in Munich. "Nevertheless, the demand for memory chips has not decreased." This, logically, means that markets beyond the PC are growing faster than the total DRAM market.

And that's where Qimonda headed.

Instead of supplying PC manufacturers and aftermarket resellers, the Qimonda crew under its CEO Kin Wah Loh plans to diversify and address markets that are less price-sensitive. The process is already under way. With its trench architecture for DRAM cells, Qimonda's products consume up to 30 prercent less power compared to standard DRAM chips, Loh claimed. This can be used to create and qualify Qimonda products for applications with a higher margin than widespread commodity DRAM.

Specialized memory for servers, where heat from high levels of power consumption and heat density create problems is one of the Loh's target markets. Low power is an obvious benefit for anything that is battery operated, mobile phones, music players, or any mobile multimedia device. The third memory market segment that Qimonda plans to address is graphics memory in computers and laptops. Mother company Infineon already has thrown the switches by introducing a line of video memory chips late last autumn.